Employers have made major changes to their health benefits in the past decade. Premiums for employer-sponsored health insurance increased more than 60 percent from 2001 to 2009, and the employee’s share of premiums went up more than 90 percent.

There has also been a decline in the numbers of businesses who offer benefits to retirees. For example, the Agency for Healthcare Research and Quality (AHRQ) Medical Expenditure Panel Survey (MEPS) found that just 6 percent of private-sector employers in 2011 offered health benefits to early retirees, those not yet eligible for Medicare.

Gap Between Employee Expectations and Actual Retiree Health Coverage is Closing:

Despite the fact that employees have seen major changes in their current and retirement health plans, a disproportionate number of them still believe their employer will provide health benefits when they retire. A new brief from the Employee Benefit Research Institute (EBRI) found that 32 percent of workers ages 45 to 64 expected to receive retiree health benefits, even though only 17.7 percent of employees worked for organizations that offered early retiree health coverage. Many among that 17.7 percent will not actually get retiree health coverage because they are not full-time employees or have not worked long enough to earn those benefits.

Employee expectations have fallen, however. In 1997, the EBRI found that 45 percent of workers nearing retirement expected retiree health insurance from their employers.

“The data show that workers are still more likely to expect retiree health benefits than retirees are actually likely to have those benefits, but the expectations gap is closing.”

Paul Fronstin, head of health benefits research at EBRI.

Retirees Can Expect Higher Health Premiums, Less Coverage in the Future:

In both the public and private sectors, employees who do have retiree health benefits can expect trends similar to those for current-employee health coverage: higher premiums, limited eligibility, and fewer benefits.

The EBRI brief pointed to a survey of employers from Aon Hewitt finding that, in 2013:

  • 78 percent of employers were likely to increase retiree contributions to premiums
  • 53 percent were likely to increase retiree cost-sharing requirements
  • 69 percent were unlikely to change their Medicare Part D prescription drug benefit strategies
  • 91 percent were unlikely to stop subsidizing benefits for current retirees
  • 95 percent were unlikely to terminate Medicare Advantage plans

A separate survey cited in the EBRI brief found that a majority of employers saw health insurance exchanges (HIX), part of the Affordable Care Act (ACA) health reform law, as a viable alternative to providing employer-sponsored retiree health coverage. Only 30 percent of employers were very or somewhat confident health insurance exchanges could supplant coverage for current employees.

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Kip Piper is a Medicare, Medicaid, and health reform consultant, speaker, and author.  A senior consultant with Sellers Dorsey, a national healthcare consultancy, as well as an advisor with Fleishman-Hillard and TogoRun.  Kip Piper advises health plans, hospitals and health systems, states, drug and device manufacturers, and investment firms throughout the U.S.  For more, visit KipPiper.com.  Follow on Twitter at @KipPiper and connect with Kip on LinkedIn.